Common stock value-Variable growth Newman manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just completed, Grips earned $4.25 per share and paid cash dividends of $2.55 per share (D_0 = $2.55). Grips' earnings and dividends are expected to grow at 25% per year for the next 3 years, after which they are expected to grow 10% per year to infinity. What is the maximum price per share that Newman should pay for Grips if it has a required return of 15% on investments with risk characteristics similar to those of Grips? The maximum price per share that Newman should pay for Grips is $.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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  4. common stock value-variable growth newman manufacturing is considering a cash purchase of the stock of grips tool. during the year just completed, grips earned $4.25 per share and paid cash dividends of $2.55 per share (d_0 = $2.55). grips' earnings and dividends are expected to grow at 25% per year for the next 3 years, after which they are expected to

Question: Common Stock Value-Variable Growth Newman Manufacturing Is Considering A Cash Purchase Of The Stock Of Grips Tool. During The Year Just Completed, Grips Earned $4.25 Per Share And Paid Cash Dividends Of $2.55 Per Share (D_0 = $2.55). Grips' Earnings And Dividends Are Expected To Grow At 25% Per Year For The Next 3 Years, After Which They Are Expected To

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Transcribed image text: Common stock value-Variable growth Newman manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just completed, Grips earned $4.25 per share and paid cash dividends of $2.55 per share (D_0 = $2.55). Grips' earnings and dividends are expected to grow at 25% per year for the next 3 years, after which they are expected to grow 10% per year to infinity. What is the maximum price per share that Newman should pay for Grips if it has a required return of 15% on investments with risk characteristics similar to those of Grips? The maximum price per share that Newman should pay for Grips is $.
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